16th Jun 2016 07:22
LONDON (Alliance News) - AFI Development PLC on Thursday said its Executive Chairman Lev Leviev was in talks with VTB Bank PJSC over an alternative proposal to the transaction previously announced in respect of the settlement of circa USD614 million of loans, having previously said a transaction would complete on Wednesday.
The real estate company, which develops property in Russia, said Leviev has proposed to provide a personal guarantee to the bank in respect of one of AFI Development's subsidiary loans, totalling USD191.1 million, for a period of twelve months from the execution of the legal documents between Leviev and the bank.
In exchange, it is proposed VTB Bank will grant AFI Development a ten-month moratorium during which the bank would agree not to accelerate the loan facilities and not to enforce its security under the loan facilities.
This comes after AFI Development on March 30 said its operating subsidiary AFI RUSS LLC received a letter from VTB, which is involved in loan agreements with two of AFI Development's subsidiaries, Bellgate Construction Ltd and Krown Investments LLC.
According to the letter, the bank had reached the conclusion that the two subsidiaries had experienced "material adverse changes in their financial conditions and there had appeared other circumstances that indicate that their obligations under the loan facility agreements could be not met on time".
Last month, AFI Development said it had been notified in writing that the bank would exercise its rights under its loan facility agreement to accelerate repayment of the USD614.0 million loans unless a transaction is completed with the bank by June 1. The bank added that full transaction documentation would need to be agreed by both parties and finalised by June 1, AFI Development had said at the time, although this date was later extended to June 15.
The transaction referred to by VTB was "contemplated" to involve the releasing of AFI Development and its subsidiaries from the loans in exchange for the disposal of three of AFI's properties to the bank.
However, on Thursday, AFI Development said if the new proposal is agreed to, it will not need to dispose the properties to the bank and, instead, will make all possible efforts, within the ten-month moratorium agreed with the bank, to dispose of the Ozerkovskaya III project and potentially some other projects to repay one of the two loans.
The guarantee would be subject to Leviev retaining effective control over the company, AFI Development said, noting that Leviev currently holds at 48.13% stake. Should Leviev cease to control the company, the guarantee would terminate, AFI Development added.
The guarantee is subject to further negotiation and documentation, which is expected to complete on August 1, the company added.
If the agreement is not completed by that date, the bank may exercise its rights under the loan facility agreement, which would "material adverse effect on the group's operations and on the value of the company's shares," AFI Development added.
Shares in AFI Development were up 14% at USD0.150 on Thursday morning.
By Hannah Boland; [email protected]; @Hannaheboland
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
AFRB.L